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Employee Referral Schemes

I have always wondered about employee referral schemes - Schemes where in an employee can earn goodies (cash or in kind)  if he/she could refer somebody and the company indeed recruits him/her.

Isn't that a pretty immoral policy especially from an employer's perspective ? I mean you want your employees to act as brokers and give them a commission ?!! Are they paying you to don a poacher's role ?

If an employee really wants a friend (or whoever) to get a job he will indeed forward his resume, there need not be a carrot dangling ahead for the same. I would feel pretty odd if I help a friend to get in and if the company pays me for the same.

This is what I feel. Is there some real good reason on why a company should introduce a referral scheme ?

Thursday, July 8, 2004

I don't see the problem, here.  If I refer a friend, I feel good having gotten him a job.  If I don't feel it's a good company to get into, I won't refer him.  However, if under normal circumstances I'd refer him anyway, and do, and the company wants to spread some $$ around as incentive, what's wrong with that?

I've worked for companies with these policies and have been compensated for referring people.  It's a nice bit of extra change, and your friend is grateful for the referral.  Who loses?

muppet from
Thursday, July 8, 2004

"Is there some real good reason on why a company should introduce a referral scheme ?".

Yes, absolutely - cash.

Don't know about in the US, but here in the UK, recruitment costs are very high. If you want to hire a full-time programmer, you generally go through one of the agencies here.

They charge a percentage of the recruit's salary as commission. It isn't just a few percent either, I've seen cases where they charge up to 30%. So, fo hiring a mid-level IT person, on say GBP 45,000, the agency will grab a nice GBP 13,500.

If they can get the existing staff to bring someone in, they save this wedge. Mostly, I think it works well, not many people would abuse such a system.

Steve Jones (UK)
Thursday, July 8, 2004

Ironically, the recruitment agencies operate a similar scheme here. They will pay you cash if you can help them to place their candidates.

Steve Jones (UK)
Thursday, July 8, 2004

Nothing immoral about it. I worked with a guy who took a leave of absence and went to grad school; he made a pretty good chunk of money referring his classmates.

Tom H
Thursday, July 8, 2004

Gee, did he charge both parties?

Drudy Mialnam
Thursday, July 8, 2004

This seems to make the most sense in an (already bad) environment where employees don't feel that the company's success is their success (the value of my equity increases, the chance of acquisition increases, the profit-sharing pool increases, etc.).  Basically, when would cash money make me refer someone, and the chance for my company to find/interview/hire someone easily wouldn't?  This incents me to embellish my personal reference of either the candidate or the company, either of which would be unethical.  If I were incented to scour the internet for candidates my company wouldn't otherwise find, maybe that's ok, but that generally doesn't happen.

I'm all for employees getting compensation and recognition, but if "making the company more successful" isn't enough incentive (and it often isn't), I'd rather see the company change things so it is, rather than add cheap shortcut incentives.

Thursday, July 8, 2004

My employer has a referral scheme.  It works because you wouldn't want to recommend a person you are not sure of.  This is due to the fact that his failure would affect you indirectly in that you would feel responsible for letting the company hire an incompetent person.  It also works because you mentor the new hire especialy if she is taking up a position junior to you. 

Friday, July 9, 2004

I'm trying to design a referral scheme for a company at the moment - What do you think makes a good scheme? 

Would you refer a contact (i.e. someone you'd come across & was impressed by rather than someone you know in person), if you knew that that person would never know it was you that referred them & in return you'd get a small bounty?

Do you think it works to brand & theme the scheme to promote it internally- or is this a bit naff? Any "reasonable" suggestions for scheme names that you'd relate to?

Jo D
Friday, July 16, 2004

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